QUESTION 2

Read the following scenario in order to answer the questions that follow.

Suppose that you are hired as an economist to advise South African policy makers on the performance of the economy. In order to evaluate the economic performance, the following data is provided.

Note: Monetary values expressed in R millions

Scenario 1
Economic indicator	2020	2021
Real GDP	4134781	4237249
Gini Coefficint	0.6	0.62
CPI	149.81	156.22
Labour Force	5884433	6139265
Population	6.5 million	6.51 million
Number of unemployed	1588796	1780356
Balance on Current Account	-118234	-153176
Balance of Financial Account	(+)109961	(+)118457
Direct quotation of $/R exchange rate	$1 = R14.50	$1 = R12.00
You are required to evaluate the five main macroeconomic objectives, namely economic growth, full employment, price stability, external stability and the equitable distribution of income.

[Tip: Show all calculations to substantiate your answer].

From scenario 1, data on several economic indicators are provided. Using your knowledge of the five macroeconomic objectives and the appropriate measurement for each, evaluate the performance of the South African economy for the period between 2020 to 2021 by answering the succeeding questions

2.1 In assessing economic growth answer the following questions:

2.1.1 Which economic indicator is the measurement used in assessing economic growth? (1)

2.1.1 Based on your answer above, provide the definition and explain the elements for the economic indicator used in assessing economic growth. (6)

2.2 In assessing full employment answer the following questions:

2.2.1 Which economic indicator is the measurement used to assess full employment?

2.2.2 Identify the mistake and explain why the formula below is not correct.

Unemployment rate = Number of unemployed x 100

Population 1

2.2.3 Based on your answer above provide the correct formula to calculate the unemployment rate

2.3 In assessing price stability answer the following questions:

2.3.1 Define both measurements used in assessing price stability. (2)

2.3.2 What is the inflation target set out by the SARB? (1)

2.4 In assessing external stability answer the following questions:

2.4.1 With reference to the exchange rate, did the rand appreciate or depreciate against the dollar? (1)

2.4.2 Based on your answer above, explain how the change in the R/$ exchange rate will impact the current account of South Africa. (2)

2.5. In assessing the equitable distribution of income answer the following questions:

2.5.1 Define the Gini Coefficient and explain what does the value of the provided Gini Coefficient suggest in terms of the performance of South Africa? (3)